Professional Indemnity insurance provides you with cover should a client allege you have caused them a financial loss due to your negligence whilst providing professional services to them.
This could be in the form of advice if you are a business consultant, or you could have provided a tendering service, or even provided designs or calculations for a project.
Regardless of the service you provide to your clients, mistakes can happen, so it makes sense to ensure your small business is protected.
It is common for many contracts to make carrying professional indemnity insurance, with a minimum cover limit, a mandatory requirement before you can be awarded the work.
All insurance providers are duty-bound to recommend to customers that they read all their insurance policies and make themselves familiar with the terms and condition. However, in modern society people are busy and may not have the spare time to sit and read their policies, some of which can be long-winded and filled with jargon.
As a result, many insured clients don’t notify their insurer straight away that they need to make a claim, because they’re simply not aware that they need to and the person buying the insurance policy had no idea what circumstances would be covered.
If you need to make a claim, then it’s best to make the enquiry at the earliest opportunity. At least that way you can move forward in the knowledge you’re going about things the correct way.
We’ve put together a few points to remember about your professional indemnity insurance and making a claim:
Claims made basis - Professional indemnity insurance is written on a ‘claims made’ basis. This means you notify the insurer that is providing your cover at the time the complaint is made, not the insurer (if different) who provided the cover at the time you carried out the work.
Notify your insurer as soon as your client indicates that they aren’t happy - It is a condition in all PI policies that you notify your insurer of any circumstance which may give rise to a claim. It is very important that you don’t wait for a formal claim, but notify your insurer as soon as your client indicates that they aren’t happy with your work. Or, if you realise you have made a mistake in client work that could have financial implications; it’s at this point you should involve your insurance provider.
Let your insurer arrange legal counsel - Don’t seek your own legal advice before notifying your insurer, your policy covers legal defence costs and if necessary your insurer will appoint a solicitor.
Don’t try to negotiate with the client, just contact your insurer - Don’t enter into any negotiations or attempt to reach an agreement as this may prejudice your insurer’s position. As a result they may decline to deal with your claim.
Call your insurance provider - A phone call to your insurance provider is the first step. The insurer will typically ask for a short email briefly outlining the circumstances, names of the involved parties, and copies of any relevant contracts. You might also be asked for your comments regarding the claimant’s allegations. If you feel you’ve made a mistake then be honest and say so, it makes it much easier for your insurer to deal with.
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